Endowments

Section Highlights

Deferred Gifts

Deferred gifts or “planned gifts” are the result of careful consideration that integrates a donor’s charitable gift into his or her overall financial, tax and estate planning objectives so as to maximize benefits for both the donor and DRAA. Planned gifts typically come from a donor’s assets rather than income. Membership in DRAA’s Legacy Society is available to donors who make deferred gifts.

Donor benefits could include income, estate and capital gains tax savings; retention of income or increased income; and potential to make a larger gift to DRAA compared to making an outright gift or pledge while living. Recognition in the society is contingent on submitting deferred gift documentation to DRAA. Deferred gifts may be made in several ways:

Retained Life Estate
One of your valued possessions, your home, can become a valued gift to us even while you are still living in it, and even if you want your spouse or other survivor to live there for life. This arrangement is called a retained life estate.

By deeding your home to DRAA now, you can obtain a sizable income tax deduction this year. The amount depends on the value of the property and your age (and the age of any person given life use). In addition, you retain the right to rent your home or make improvements to it. You continue to have responsibility for maintenance, insurance and property taxes.

Any personal residence qualifies for this tax deduction-a farm (with or without the house), vacation home, condominium, even stock in a cooperative housing corporation.

Your gift to DRAA must be an irrevocable remainder interest. In other words, after your life use and that of any survivor, DRAA receives the property outright.

If you don't want to live in your unmortgaged home any longer, consider transferring it to a charitable remainder trust. The trustee can then sell the property and invest the proceeds in income-producing securities. You'll receive an income for life—and so can a survivor you name. The trust principal becomes ours, without exposure to estate taxes when spouses are the only income beneficiaries.

When you transfer appreciated property that has been held long-term, you won't pay any tax on the capital gain. And you'll benefit from a substantial current income tax deduction.

For additional information, please call DRAA at (925) 932-1731 or send e-mail to info@draa.org.

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Charitable Gift Annuity
The concept of the charitable gift annuity in America dates back to the 1870s, when a parishioner first donated a valuable asset to the church in exchange for a flow of income. Today, the concept includes valuable tax benefits for donors.

A charitable gift annuity is a contractual arrangement between the donor and DRAA.

Features and benefits of a charitable gift annuity:

Assets, usually cash or marketable securities, are transferred to DRAA in exchange for a promise to pay an annuity for the lifetime of the donor.
The payout rates are determined based on the age of the income beneficiary and the amount of the gift. The payment amount is a fixed amount established at the time the contract is negotiated. Currently, gift annuity proposals and payout rates are being reviewed and accepted individually by DRAA’s Board of Directors.
The assets to fund the gift annuity may be transferred to the DRAA without incurring capital gains tax.
The income received by the beneficiary is taxed differently, depending on the asset used to initially fund the gift annuity. The cost basis of the asset given to DRAA affects the character of the income received by the beneficiary. With a high-cost-basis asset such as cash, a significant portion of the income is tax exempt. With a low-basis asset, a significant portion of the income is characterized as a capital gain.
Income beneficiaries can include your spouse, children or parent, or anyone else you would like to benefit with income for lifetime or a term of years. Certain estate and gift tax laws apply to beneficiaries other than your spouse.
You receive an income tax charitable deduction in the year you establish the gift annuity, equal to the present value of the portion of the amount given that will eventually go to DRAA.
DRAA manages the assets of the annuity and handles the responsibilities such as timely payment of income to the beneficiaries and issuing of annual required information returns.
The gift received at the end of the annuity term will be used for the purpose you designate in the document or endowment agreement created at the time the annuity is established. You may specify that the amount be used immediately or for an endowment for purposes such as scholarships, faculty support, program support, buildings, or the highest priority as set by the president or the dean of the department you would like to benefit.

If you would like more information, we invite you to contact DRAA at 925.932.1731 or email info@draa.org. We would be pleased to provide you (and/or your financial adviser) with further information.

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Charitable Lead Trust
If your goal is to provide an inheritance for your children, but you would also like to make a significant charitable gift through your estate, a charitable lead trust can help you satisfy both objectives. It can provide a significant charitable gift through your estate and provide an inheritance to your children.

When people think about providing an inheritance to children and making a significant charitable gift through their estates, a vehicle known as the "charitable lead trust" is an excellent way to accomplish both objectives.

A charitable lead trust is a trust that the estate owner establishes either during life or at death. The income from the trust flows to a charitable organization, like the DRAA, for a stated number of years. After that period, the assets inside the trust are distributed. The fact that the assets will one day be transferred to another person means that this trust has one further distinction: it is a "nongrantor" trust, as opposed to a grantor trust. "Nongrantor" means the trust assets are not owned by the person who established the trust, and the assets are not going to be returned to him or her someday. (A "grantor" trust is one in which the donor controls the assets, deciding where they will eventually be distributed. As a result, the donor is subject to tax on the assets.)

Tax Benefits
Of all the charitable vehicles available to donors, the charitable lead trust is among the most complex. However, a nongrantor lead trust does offer the advantage of providing excellent tax benefits to the estate owner.

For additional information please call DRAA at (925) 932-1731 or send e-mail to info@draa.org.

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Charitable Remainder Trust
While there is no single way to achieve all of your personal and financial goals, there is one strategy that can meet many of your needs—a charitable remainder trust. In the right circumstances, this plan can increase your income, reduce your taxes, unlock appreciated investments, rid you of investment worries and ultimately provide very important support.

When you create a charitable remainder trust, you irrevocably transfer money, securities or other assets to a trust that will then pay you an income for life or for a period of years. If you wish, the trust also can pay an income to another beneficiary of your choice. At the death of the surviving beneficiary, the remaining principal in the trust goes to DRAA.

You can design your trust to fit your own special needs. First, you decide how much you'd like to put into the trust. Second, you determine the income you'd like to receive from the donated assets. The rate of income return you select must be at least 5 percent. Usually, the rate selected is 5 percent to 7 percent. The best rate for you will depend upon the number of beneficiaries you select and their ages. Third, you decide which type of charitable remainder trust will work best for you.

Types of Charitable Remainder Trusts:

Annuity trust: Pays you a fixed dollar amount.
Standard unitrust: Pays you an amount equal to a fixed percentage of the net fair market value of the trust assets as recalculated yearly.
Net income with makeup unitrust: The trust pays the lesser of the fixed percentage specified by the trust agreement or the actual trust income. Such trusts provide, however, that in any year the trust income exceeds the fixed percentage payout, the excess must be used to make up any prior deficiencies. It offers great flexibility in retirement planning, because income can effectively be deferred until later years.
Net income with no makeup unitrust: Pays you the trust's actual income or a fixed percentage of market value (as recalculated yearly), whichever is less. Deficiencies are not made up. This type is used by donors who want to maximize the benefits to the charitable organization.
Flip unitrust: Set up as either of the last two types, this trust converts to a standard unitrust on a triggering event, such as the sale of an "unmarketable" asset used to fund the trust.

Tax Benefits
When you fund the trust, you immediately obtain the benefit of a sizable income tax charitable deduction. This is equal to the present value of the remainder interest ultimately payable to DRAA, based on Internal Revenue Service tables of life expectancy factors. The older the beneficiary, the greater the charitable deduction.

You can fund your charitable remainder trust with cash, securities or other property. Highly appreciated assets that generate low current income are an ideal funding medium. While you'd be reluctant to sell such assets directly because of the tax you would pay on the gain, you can transfer them to the trust without incurring the capital gains tax. The trust could sell the assets without incurring any tax and then reinvest the proceeds in order to secure a higher current income yield.

Who Can Benefit from a Charitable Remainder Trust?

An individual nearing retirement. You may have personal investments that are highly appreciated, yet have a low yield. By using these assets to fund a unitrust or annuity trust, you can avoid the capital gains tax trap and supplement your income from a qualified retirement plan.
A retired couple or individual between ages 60 and 75. If you have a healthy life expectancy, over a longer term a unitrust can provide a hedge against inflation, assuming the trust investments benefit from a gradually increasing market value that exceeds the usual periodic downturns.
An individual over age 75. For you, an annuity trust has a special appeal. You may be more concerned about receiving a fixed and unchangeable income payment than beating long-term inflation.
A single person over age 80. You might find that a unitrust with a term of 20 years is attractive. The payout balance of the term extending beyond your lifetime can be distributed to your children, grandchildren or anyone you designate.
Someone supporting an elderly parent. You may be seeking a good way to increase a parent's income and also make a philanthropic contribution. A charitable remainder trust can accomplish both objectives.

Benefits
Unlike other ways of contributing to DRAA, a charitable remainder trust allows you to keep the benefits of the donated assets for life, knowing you'll help to shape our future later. Look at these personal benefits you can enjoy:

Increase your income when you give to a trust designed to pay out more than you now earn on the assets you will contribute.
Receive a money-saving federal income tax charitable deduction.
Pay no capital gains tax when you transfer unmortgaged appreciated assets to the trust.
Free yourself from investment worries by securing professional management of the assets you give.
Gain the enduring satisfaction of having made a major commitment to our important work.

For additional information please call DRAA at (925) 932-1731 or send e-mail to info@draa.org.

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Bequests
Leave your legacy by making a gift in your will to friends, family and charitable organizations. A bequest is one of the simplest ways to remember those you care about most.

Estate planning begins with the definition of goals. The process involves considering current and future needs, defining a way to meet those needs through management of assets during life, and providing for the distribution of those assets upon death. Some people have tax savings as their primary goal. Others are driven by non-tax issues such as providing income for a friend or family member.

Consult Your Attorney
Regardless of the motivation for estate planning, it is important to have the assistance of legal counsel. Attorneys and financial advisors are able to assess individual estate planning objectives and identify potentially adverse tax consequences. Legal counsel is necessary to draft trust agreements, wills and other estate planning documents. Any estate plan should be reviewed periodically to incorporate changes in tax laws and to consider an individual's changing needs, goals and intentions.

Remembering DRAA in your will is one of the simplest ways to create a legacy of support for future generations of artists.

Gifts made by will may be for a specific dollar amount, a percentage of the total estate or the residue remaining after all debts, taxes, expenses, and other bequests have been paid. A specific bequest of property such as art objects, rare books, equipment, or real estate may also be made.

Types of Bequests

The following items can apply in the case of bequests to individual heirs or bequests to charitable organizations.

Specific bequest. This is a gift of a specific item to a specific beneficiary.
General bequest. This is usually a gift of a stated sum of money. It will not fail, even if there is not sufficient cash to meet the bequest.
Contingent bequest. This is a bequest made on condition that a certain event must occur before distribution to the beneficiary.
Residuary bequest. This is a gift of all the "rest, residue and remainder" of your estate after all other bequests, debts and taxes have been paid.

The following items are special considerations when you plan a charitable bequest to help support DRAA’s mission.
Unrestricted bequest. This is a gift for DRAA general purposes, to be used at the discretion of our governing board. A gift like this–without conditions attached–is frequently the most useful, as it allows us to determine the wisest and most pressing need for the funds at the time of receipt.
Restricted bequest. This type of gift allows you to specify how the funds are to be used. Perhaps you have a special purpose or project in mind. If so, it's best to consult DRAA when you make your will to be certain your intent can be carried out.
Honorary or memorial bequest. This is a gift given "in honor of" or "in memory of" someone. We are pleased to honor your request and have many ways to grant appropriate recognition.
Endowed bequest. This bequest allows you to restrict the principal of your gift, requiring DRAA to hold the funds permanently and use only the investment income they generate. Creating an endowment in this manner means that your gift can continue giving indefinitely.

Please inform DRAA when you have named us in your will. We would very much like the opportunity to thank you for your generosity.

The official bequest language for the DRAA is: "I, [name], of [city, state, ZIP], give, devise and bequeath to Diablo Regional Arts Association [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."

For additional information, please call DRAA at (925) 932-1731 or send e-mail to info@draa.org.

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Wealth Replacement Trust
Perhaps you would like to make a sizable contribution to DRAA now to help meet our current needs, but you don't want to reduce the estate you will pass to your family. A Wealth Replacement Trust will allow you to do this.

If you would like to make a sizable contribution to DRAA now to help meet our current needs, but don't want to reduce the estate you will pass to your family, purchasing life insurance is the best approach.

If you own the insurance policy, ultimately the proceeds will be included in your taxable estate. The remedy: If your sole heir to the policy value is a responsible adult, make him or her the policy owner and beneficiary. Then give that individual a yearly amount adequate to pay the premium, utilizing your annual gift tax exclusion.

For multiple heirs or a larger gift, take advantage of an exceptional plan called a "wealth replacement trust" and name your spouse, children or other individuals as trust beneficiaries. The trust is the owner of the policy and eventually will receive and manage the proceeds. The trust is irrevocable, and if designed correctly, the insurance will be excluded from your taxable estate. You transfer enough money to the trust each year so that the trustee can pay the policy premiums.

To avoid any gift tax (or use of your estate and gift tax credit) on yearly gifts to the trust over the annual gift tax exclusion, the trust agreement must give your beneficiaries the temporary right each year to withdraw these funds. However, should your beneficiaries exercise this power, the insurance may lapse due to insufficient funds to pay the yearly premium.

For additional information, please call DRAA at (925) 932-1731 or send e-mail to info@draa.org.

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Life Income Gifts
Discover how your gift of cash, stock or other property to DRAA may provide you and your spouse or other beneficiary with annual income for life.

If you would like to make a significant gift to DRAA but still need the income produced by your assets, or if your assets are highly appreciated and you are reluctant to sell them because of the capital gains tax you might incur, you might be interested in a life-income gift. Discover how your gift of cash, stock or other property to DRAA may provide you and your spouse or other beneficiary with annual income for life.

Benefits of Life-Income Gifts
DRAA offers a variety of life-income arrangements. With a life-income plan, you can make a gift while retaining a stream of income for your lifetime or a term of years. You can transfer highly appreciated assets directly to a life-income vehicle without selling them and incurring capital gains tax. DRAA, as trustee, sells the donated assets and invests the proceeds in the DRAA Legacy Fund, a diversified portfolio. The income you receive is taxable to you.

Depending on the type of life-income vehicle you choose, the income may be characterized as ordinary income, capital gains, tax-exempt income, or some of each.

A life-income gift also provides you with immediate income tax benefits. You receive a charitable contribution income tax deduction at the time you establish the life income gift.

There may also be significant estate and gift tax benefits. After the death of the last beneficiary or the end of the term, your gift is transferred to DRAA. The proceeds of your gift are used for the purposes you designate at the time of your contribution. By choosing a life-income gift plan, you have the security of the retained income stream, the tax benefit of an immediate charitable income tax deduction, and the satisfaction of making a gift to establish your legacy at the DRAA. It's a situation where everyone wins!

If you would like more information, we invite you to contact DRAA at 925.932.1731 or email info@draa.org. We would be pleased to provide you (and/or your financial adviser) with further information.

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Charitable Gift Annuity
A charitable gift annuity is a contractual arrangement between the donor and DRAA. Assets, usually cash or marketable securities, are transferred to DRAA in exchange for a promise to pay an annuity for the lifetime of the donor.

Features and benefits of a charitable gift annuity

Assets, usually cash or marketable securities, are transferred to DRAA in exchange for a promise to pay an annuity for the lifetime of the donor.
The payout rates are determined based on the age of the income beneficiary and the amount of the gift. The payment amount is a fixed amount established at the time the contract is negotiated. Currently, gift annuity proposals and payout rates are being reviewed and accepted individually by DRAA’s Board of Directors.
The assets to fund the gift annuity may be transferred to the DRAA without incurring capital gains tax.
The income received by the beneficiary is taxed differently, depending on the asset used to initially fund the gift annuity. The cost basis of the asset given to DRAA affects the character of the income received by the beneficiary. With a high-cost-basis asset such as cash, a significant portion of the income is tax exempt. With a low-basis asset, a significant portion of the income is characterized as a capital gain.
Income beneficiaries can include your spouse, children or parent, or anyone else you would like to benefit with income for lifetime or a term of years. Certain estate and gift tax laws apply to beneficiaries other than your spouse.
You receive an income tax charitable deduction in the year you establish the gift annuity, equal to the present value of the portion of the amount given that will eventually go to DRAA.
DRAA manages the assets of the annuity and handles the responsibilities such as timely payment of income to the beneficiaries and issuing of annual required information returns.
The gift received at the end of the annuity term will be used for the purpose you designate in the document or endowment agreement created at the time the annuity is established. You may specify that the amount be used immediately or for an endowment.

If you would like more information, we invite you to contact DRAA at 925.932.1731 or email info@draa.org. We would be pleased to provide you (and/or your financial adviser) with further information.

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Deferred Payment Gift Annuity
A deferred-payment charitable gift annuity is a contractual arrangement between the donor and DRAA. With a deferred-payment feature, the assets are transferred to DRAA in exchange for a promise to pay fixed income beginning at a future date -- usually the donor's retirement.

Features and benefits of a deferred-payment gift annuity

Assets, usually cash or marketable securities, are transferred to DRAA in exchange for a promise to pay an annuity for the lifetime of the donor at a specified date in the future.
The payout rates are determined based on the age of the income beneficiary at the time the income payments commence and the amount of the gift. Currently, gift annuity proposals and payout rates are being reviewed and accepted individually by DRAA's Board of Directors.
The assets to fund the deferred-payment gift annuity may be transferred to DRAA without incurring capital gains tax at the time of the transferred.
The income received by the beneficiary is taxed differently, depending on the asset used to initially fund the gift annuity. The cost basis of the asset given to DRAA affects the character of the income received by the beneficiary. With a high-cost-basis asset such as cash, a significant portion of the income is tax-exempt. With a low-basis asset, a significant portion of the income is characterized as capital gains.
Income beneficiaries can include your spouse, children or parent, or anyone else you would like to benefit with income for lifetime or a term of years. Certain estate and gift tax laws apply to beneficiaries other than your spouse.
You receive an income tax charitable deduction in the year you establish the gift annuity, equal to the present value of the portion of the amount given which will eventually go DRAA.
DRAA manages the assets of the annuity and handles responsibilities such as timely payment of income to the beneficiaries and issuing of annual required information returns.
The gift received at the end of the annuity term will be used for the purpose you designate in the document or endowment agreement created at the time the annuity is established. You may specify that the amount be used immediately or for an endowment for specific.

If you would like more information, we invite you to contact DRAA at 925.932.1731 or email info@draa.org. We would be pleased to provide you (and/or your financial adviser) with further information.

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Will Bequests
You may be able to contribute to DRAA at a substantially higher level than you believe possible. A will bequest provides for a significant gift from your estate while not affecting your present income. Will bequests are a major source of future income for DRAA.

A bequest may include gifts of

Cash
Stocks
Art work
Real estate
Other assets

DRAA welcomes the opportunity to work with you and your advisors in arranging a gift - named or un-named - that will meet your goals and provide maximum benefit to arts organizations.
Tax Benefits: Your estate will receive a tax receipt for the full value of your bequest, saving you tax dollars. The receipt may also be carried back and claimed in the year prior to death.

Benefits of making a will

A carefully designed will is the core of any estate plan. The will ensures that your wishes regarding the disposition of your assets - however large or small - are carried out. The benefits of making a will are:

You, not the courts, decide how your assets will be distributed for the benefit of family, friends, favorite charities, and other organizations
Your estate is settled quickly and efficiently without burden to your heirs
You, not the courts, select an executor to ensure that your wishes are carried out
Taxes and expenses can be minimized and paid in a timely fashion
Your assets will not have to be sold during market downturns, as could be the case if you leave no will
You have peace of mind knowing your wishes will be carried out and your responsibilities met.

If you would like more information, we invite you to contact DRAA at 925.932.1731 or email info@draa.org. We would be pleased to provide you (and/or your financial adviser) with further information.

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THE INFORMATION PRESENTED ON THIS SITE IS IN SUMMARY FORM. ALL DONORS MUST CONSULT WITH AND RELY EXCLUSIVELY ON THEIR OWN ATTORNEYS OR OTHER FINANCIAL ADVISORS FOR TAX AND LEGAL ADVICE.